Northern Promise is a six-part series that explores the pace and progress of development in Canada’s remote communities. In this fifth instalment, Nicolas Van Praet explores mining projects in northern Quebec

SEPT-ÎLES, Que. • The sun is setting on a cool September evening in this northern Quebec port town and three cargo ships sit anchored in the half-moon bay.

From this distance several kilometres away, the ocean-going freighters look like giant match sticks waiting to be struck. Above them, storm clouds hang like a menacing hook and behind, you can sketch the outline of North America’s biggest primary aluminum smelter — Alouette, its hill-perched electrolytic pots powered by transmission wires stretching from Hydro Quebec’s massive Churchill Falls hydroelectric facility.

Sept-Îles, named for the seven-island archipelago that fronts the bay, is a 10-km wide natural harbour in the Gulf of the St. Lawrence some 650-km downriver from Quebec City. The waters here are deep, plunging down as much as 80 metres, and they’re free of ice for year-round passage — a huge advantage for commodity producers getting their goods to market.

The port today is the only way out for the vast reserves of iron ore mined in the Labrador Trough, the sole gateway to get the steel-making substance by sea to its most important market: China. And if it’s already a strategic site — the port handled 28 million metric tonnes in 2012, making it Canada’s third-biggest port after Vancouver and Saint John, N.B. by volume — bullish forecasters say you ain’t seen nothing yet.

“There’s a reality here that many people can’t quite grasp yet in terms of the impact to come in the years ahead as all these new mining projects come online and export their ore through our port,” said Port of Sept-Îles President Pierre Gagnon. “Realistically, we can punch through the 100-million-tonne barrier in five to 10 years. And if all the currently planned production moves forward, it will be more than double that.”

When the Iron Ore Co. of Canada (IOC) first came to the area in the late 1940s to lay the groundwork for a new 575-km railway north to the iron ore riches of the Quebec-Labrador border region (a massive project for the time that involved 6,000 men hacking through the inhospitable mountains, bog and scrub of previously untouched wilderness), project managers for the company found a puny village of 350 Québécois fishermen.

As the February 1954 issue of Popular Mechanics described it: “It was the last northeastern outpost of civilization this side of Goose Bay. Ships unloaded right on the ice.”

Sixty years later, that pint-sized place and its previously inconsequential economy is a distant memory.

The catalyst for all this growth? A new multi-user wharf south across the Sept-Îles bay at Pointe Noire being built at a cost of $220-million. When completed, the 450-metre-long dock will be able to accommodate up to 50 million tonnes of material a year carried by the largest bulk carriers in the world — 350,000-tonne-and-up Chinamax ships. Another 50 million tonnes of capacity can be added by expanding the dock facility later.

The need for the new wharf is clear.

Rio Tinto’s Iron Ore Co. has its own private dock on the north side of Sept-Îles bay from which it exports iron ore and charges companies that want to use it premium rates. The port at Port Cartier, some 65-km south of Sept-Îles is owned by ArcellorMittal as is the railway that goes there from the Labrador Trough, so other companies don’t have access to it.

As for Pointe Noire, the depth of two wharf stations there is barely 16-metres, meaning large boats can’t dock. That forces the lone current iron ore user, Cliffs Natural Resources, to pack its rock concentrate onto smaller self-unloading vessels, which then shuttle to the larger boats anchored further out in the bay. Macquarie Research estimates this feeder-boat process likely adds at least US$5 per tonne to operating costs, a significant sum considering the quantity of iron ore going through its facilities.

Given the potential for a marked increase in iron ore output from new producers in the trough, including Vancouver-based Alderon Iron Ore Corp. and Toronto-based Champion Iron Mines Ltd., and the limits of existing facilities, new infrastructure was needed. Dredging has been completed and piles are now being laid for a scheduled completion date of March 2014. The federal government is paying $55-million of the cost with five miners and port debt financing the rest.

Alderon, whose Kami iron ore mine near Labrador City is expected to start production in the fourth quarter of 2015, is paying about $20-million for eight million tonnes of annual handling space at the dock. Like the other private-sector users, it will get the money back through a discount on shipping fees when it starts exporting.

“We definitely needed this port facility,” said Ian Chadsey, Alderon’s head of investor relations. “The existing port is really set up for the lakers that go up to the Great Lakes. What we’re talking about is Capesize vessels that will take iron ore out to China.”

There are obstacles to Sept-Îles becoming an even larger maritime hub.

Cleveland-based Cliffs, which owns the Bloom Lake iron ore play in Quebec, is currently embroiled in a legal dispute with the port over the company’s plans to improve its own dock facilities. The port needs the Cliffs lands for access to its multi-user dock expansion. Mining executives interviewed said privately they don’t expect the dispute to derail the project; Mr. Gagnon declined to discuss the matter.

Railway transport is also an issue. At present, there is only one rail link — the IOC-owned Quebec North Shore and Labrador Railway — for producers to get their mineral the hundreds of kilometres down to Sept-Îles. Although the line has enough capacity to handle near-term growth, another railroad will be needed if the Labrador Trough is to reach its full producing potential.

And then there’s iron ore pricing, which has triggered major booms and busts in Sept-Îles over the years. Although producers continue to cite volatility, prices have recovered to about US$135 a tonne after a precipitous drop a year ago that forced some companies such as Labrador Iron Mines Holdings Ltd. to halt capital spending and delayed plans for others. Imports of the commodity reached a record high in China in July, according to Bloomberg data, and observers expect the trend to continue as demand for steel in that country strengthens amid an acceleration of infrastructure construction and a longer-term structural shift towards urbanization. China buys roughly two-thirds of the world’s iron ore carried by ship.

In all, the city of Sept-Iles has identified 23 mining and industrial projects that will have direct bearing on its longer-term municipal planning and economy, including a separate expansion at the Alouette facilities and the new Arnaud apatite mine.

What those projects mean for the city is simple: more jobs, more people and more pressure on housing and infrastructure.

There is a triple black-diamond run at the local ski resort here called “La Panique” (Panic). Municipal officials are starting to feel just that.

The town now harbours a population of 26,000. The economic development department expects that to double by 2028 in the most optimistic scenario. During the next five years alone, it predicts 1,500 new households will join the assessment rolls.

Sept-Îles is already home to one of Canada’s largest trailer parks. Dubbed “Place Ferland,” the maze of 1,200 mobile homes has three separate entrances off the highway. First-time home buyers for whom most houses are out of their price range have gravitated there. But even these shelters have climbed in price to nearly $200,000 amid the recent housing crunch.

The town has few condominiums available compared to bigger cities. And before 2012, no new apartment buildings had been built in the town for three decades. The rental vacancy rate remains under 1%.

Today, a new hotel is being readied on the shoreline — the first such construction in years. Employers such as the local McDonald’s who are scrambling to fill lower paid jobs have found creative ways to find staff. In the case of the hamburger giant, it poached recent Filipino immigrants from other parts of Quebec and subsidized their housing in exchange for multi-year work commitments.

“Our biggest challenge will be managing growth and everything that comes with that,” said Sept-Îles economic development official Russel Tremblay. “Unemployment has pretty much already disappeared. Everyone who wants to work is working.”

In a province in which the jobless rate topped 8% in August and the economy is sputtering at best, that’s a rarity in itself.

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